Report: DM Owns Online Advertising

Direct marketing increasingly rules the Internet, according to a report published yesterday by Nielsen//NetRatings.

Sixty-six percent of online ad impressions served in fourth-quarter 2002 were direct marketing ads, said the report, “The State of Online Advertising.” This is up from 59 percent in fourth-quarter 2001, according to the New York-based online measurement firm's AdRelevance service.

“If you firmly believe online advertising is a direct marketing medium, you think like most advertisers out there,” the report said. “While the balance between branding and direct marketing has shifted throughout the tumultuous life of the Internet, today direct marketing is lord and king.”

Still, this means that branding ads — defined as those “that attempted to elicit no direct action by consumers; they simply reinforced consumer thoughts by frequent exposure” — accounted for 34 percent of online ads served in fourth-quarter 2002.

However, direct marketing's dominance of the Internet would be even more pronounced if it weren't for tiny ads such as buttons that have little room for anything other than a logo, Nielsen//NetRatings said.

Ads with calls to action accounted for about 80 percent of all banners, large-format ads and skyscrapers served in the fourth quarter of 2002. But branding accounted for 55 percent of small-button advertising, the report said.

“Banners, large rectangular formats, and skyscrapers all afford the advertiser a large area to convey a complex message, often with a plea for immediate consumer action,” the report said. “Smaller formats limit the advertiser's ability to convey a message, so tiny ads tend to have only logos and branding.”

In other findings, the number of ad sizes supported by the average Web site rose from 5.3 in fourth-quarter 2000 to 11 in fourth-quarter 2002. Online marketers “appear to love direct marketing strategies and they need a wide selection of large ad formats to convey their messages,” the report said.

As for the controversial pop-up, the format's use went from 1.9 percent of online ad impressions in fourth-quarter 2001 to 3.5 percent in fourth-quarter 2002.

Led by online casinos, the entertainment industry used the highest percentage of pop-ups, about 10 percent, in its online ad campaigns in fourth-quarter 2002. Hardware and electronics advertisers came in second in the proportion of pop-ups used in campaigns at just under 8 percent, led by X10, the seemingly ubiquitous marketer of digital cameras.

The report also found that the use of house ads on Web sites dropped 3 percent from the fourth quarter of 2001 to fourth-quarter 2002, now accounting for 27 percent of all impressions served.

Reference and education sites showed the least amount of unsold space, as an average of 11.4 percent of their inventory went unsold in fourth-quarter 2002, the report said.

Yellow and white pages sites were No. 2 in unsold ads, with an average of 19.2 percent of their inventory going unsold in the same quarter. Nos. 3 and 4 were games sites and portals, with an average of 20.8 percent and 21 percent of inventory going unsold, respectively.

Shopping and auction sites came in last in a field of 27 categories with an average of 42.3 percent of inventory going unsold in the quarter, according to Nielsen//NetRatings.

Not surprisingly, the report also found that Web sites' published advertising rates have come way down — from $30 per thousand impressions for banner ads in the second quarter of 2000 to under $18/CPM in fourth-quarter 2002, a 40 percent drop.

“One can almost overlay rate card prices and a Nasdaq trend and not be able to tell which line is which,” the report said.

Currently, business-to-business sites publish the highest rates for banners at $52/CPM, and games sites and search engines publish the lowest, at 75 cents/CPM and $1.75/CPM, respectively.

What's more, “many sites publish rates that come far down upon negotiation,” the report said.

Fortune 500 advertising online is growing, according to the report, as 286 Fortune 500 companies advertised online in fourth-quarter 2002 compared with 270 in the same quarter of 2001., No. 492 on the Fortune list, was No. 1 online with 12.2 billion fourth-quarter impressions.

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